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Would you ever need more than one long-short fund?
First off, not all long-shorts are created equal. Many different strategies, most of which have not been used successfully.
However, a few have done quite well. For example:
MFLDX gained 31% in 2009 after losing only (13%) in 2008. BPLEX gained 80% in 2009 after losing (21%) in 2008.
There aren't too many other performances like this from the long-shorts, but some of these funds have shown that they can hedge effectively. And you do pay high fees for this.
I like to have a 10%-15% allocation to such vehicles. Something that can zig when others zag, but at the same time its not a bear fund (at least, most of the time). Its a diversifier.
I recently acquired a few long-short funds (and I have had MFLDX for a few years). The reason why is that I would normally keep about 40-50% exposure outside of the stock market. That is my comfort level. Most of the money not in stock mutual funds has been in bond funds. When there was a spike in yields a few months back, both stocks and bonds went south. Other than cash, there seemed to be nowhere to hide in such a scenario, and we are likely to see that again in the future. Bonds were thought to offer me some degree of protection if my stock funds went down. Since they no longer served that role in my portfolio, I needed to find something to replace some of my bond funds that might provide that role. I wanted to find something that would survive increases in interest rates, and still hopefully offer gains in the long term. So I looked for funds that held their own during yield spikes, and still offered decent gains before and after the spike. Some long-short funds did a good job at minimizing losses during that period. So I have been slowly moving money out of some of my bond funds and moving them into those long-short funds. They are playing the role in my portfolio that some of my bond funds had been playing. Some of my bond fund money will probably move into floating rate funds also.
Comments
Regards,
Ted
However, a few have done quite well. For example:
MFLDX gained 31% in 2009 after losing only (13%) in 2008.
BPLEX gained 80% in 2009 after losing (21%) in 2008.
There aren't too many other performances like this from the long-shorts, but some of these funds have shown that they can hedge effectively. And you do pay high fees for this.
I like to have a 10%-15% allocation to such vehicles. Something that can zig when others zag, but at the same time its not a bear fund (at least, most of the time). Its a diversifier.